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Question

Q17. Consider the following statements about Currency Wars:

1. A currency war refers to a situation where a number of nations seek to deliberately depreciate the value of their domestic currencies.

2. Currency wars are also known as competitive devaluations.

Which of the above statements are correct?


A

a) 1 only

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B

b) 2 only

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C

c) Both 1 and 2

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D

d) Neither 1 nor 2

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Solution

The correct option is C

c) Both 1 and 2


A currency war refers to a situation where a number of nations seek to deliberately depreciate the value of their domestic currencies in order to stimulate their economies. Although currency depreciation or devaluation is a common occurrence in the foreign exchange market, the hallmark of a currency war is the significant number of nations that may be simultaneously engaged in attempts to devalue their currency at the same time.


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